Rubber Sets Five-Month High as Monetary Easing Raises Commodities Appeal

Rubber reached a five-month high after the Bank of Japan eased its monetary policy, raising speculation other central banks may follow suit and boosting the appeal of commodities as an inflation hedge.

The March-delivery contract gained as much as 1.6 percent to 322.6 yen per kilogram ($3,878 a metric ton), the highest level since April 26, before trading at 321.7 yen on the Tokyo Commodity Exchange at 11:32 a.m.

Japan’s central bank yesterday cut its benchmark overnight interest rate for the first time since 2008 and pledged to hold it at “virtually zero” until officials foresee a sustained end to deflation. The bank also adopted a 5 trillion yen program aimed at lowering long-term borrowing costs and the premiums on corporate debt. Gold rallied to a record following the action, while the Reuters/Jefferies CRB Index of raw materials increased 1.6 percent yesterday, the biggest gain since Sept. 1.

“Investor appetite for commodities is increasing as central banks in advanced nations are moving to loosen their monetary policy further to sustain economic recovery,” said Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co. “Rubber was bought in tandem with metals and oil.”

The renewed push for monetary policy easing comes as the International Monetary Fund warns growth in advanced economies is falling short of its forecasts ahead of its annual meetings in Washington this week.

Stimulus Plans

The unexpected action by the Japanese central bank follows the U.S. Federal Reserve’s move toward more unconventional easing. Bank of England officials may consider further stimulus tomorrow, while the central banks of Australia, Canada and New Zealand are among those holding fire on interest-rate increases.

“The Bank of Japan is at the head of the pack,” said Stewart Robertson, an economist at Aviva Investors in London, which manages about $370 billion in assets. “It looks like a lot of others will follow.”

Rubber futures also increased as the physical market in Thailand, the largest producer and exporter, extended gains on tight supply, Tasaka at ACE Koeki said.

The benchmark Thai rubber price gained 0.2 percent to 110.65 baht ($3.69) a kilogram yesterday, according to the Rubber Research Institute of Thailand. A lack of supply continued to drive prices higher, the institute said.

The Shanghai rubber market is closed as China marks National Day holidays from Oct. 1 to Oct. 7.

Natural-rubber inventories monitored by the bourse expanded 4,680 tons to 31,580 tons, based on a survey of 10 warehouses, the exchange said Sept. 30.

(bloomberg.com)